Economic Growth

Andrea Leadsom Excerpts

Wednesday 15th May 2013 Commons Chamber

[Ed Balls]

I want to make some progress, then I will take some more interventions.

This is not simply the Queen’s Speech of a coalition Government who have ground to a halt; it is much worse than that. At a time when living standards are falling; when child poverty is rising; when more than 950,000 young people are out of work; when, as we learned today, unemployment is rising again and is now higher than at the general election; when, as we also learned today, prices are rising four times faster than wages in our economy; when our economy has flatlined for three years; when overall business investment has stalled and actually fallen in the past two years; when, as a result, our triple A credit rating has been downgraded; when the Office for Budget Responsibility says that the deficit reduction plan has completely stalled; and when the International Monetary Fund is now in town saying that the Chancellor is “playing with fire” by sticking to his failing plan, you would think that the priority for the Prime Minister, the Chancellor, the Cabinet and the Conservative party would be to see what they could do to boost economic growth and long-term investment in our country. But no, it seems that that is not their priority.

[Andrea Leadsom (South Northamptonshire) (Con)]

We have already had a credit downgrade from one of the agencies, and the agency made it clear that that was a result of the problems that our economy has had in recovering. Is the right hon. Gentleman not concerned that if we were to abandon our plans, there could be a further downgrade? If we simply did as he suggests and opened the floodgates to more debt and borrowing, we would put our economy into severe crisis as a result of rising interest rates and a lack of credibility in international markets.

[Ed Balls]

I ask the hon. Lady to reflect for a moment on the logic of her position. For the past three years, she and the Chancellor have consistently said that they had to stick to the plan, even though growth was low, even though the deficit was not coming down and even though living standards were under pressure, because otherwise they would lose the triple A credit rating. Now they have lost the triple A rating, but they still maintain that they have to stick to the plan. That is completely illogical. The credit rating agency said in terms that it had downgraded us because there was no growth in the economy, and that that was choking off deficit reduction. Sticking with a failing plan that is not working and that has resulted in the deficit reduction being stalled is not the way to keep our credit rating—if that is the Government’s objective. The way to keep it is to get the economy moving, get people investing and get people back into long-term sustainable jobs. Until we do that, the Chancellor is going to continue to fail.

[Andrea Leadsom]

rose—

[Ed Balls]

If the hon. Lady would like to have another go, I am happy to give way to her.

[Andrea Leadsom]

I am grateful to the right hon. Gentleman for letting me have another go. I put it to him that he really does not understand the point about the credit rating agency in this context. The whole point about confidence in the British economy is that people need confidence in Britain’s ability to get out of the economic mess that his Government left us in. This is not about the absolute level; it is about market confidence. He must surely understand that keeping a very good credit rating is essential in order to have an affordable cost of borrowing.

[Ed Balls]

I do not want to prolong this argument, but I must explain to the hon. Lady the term structure of interest rates. The 10-year bond yields are the accumulation of market expectations of three-month interest rates added up every three months over 10 years. Why are our long-term interest rates so low? It is because people think that short-term rates are going to stay low because the economy is flat on its back. People would have to be economically illiterate to think that our long-term interest rates were driven by market confidence at a time when we are being downgraded by the agencies. Our long-term interest rates are low because our economy is not growing.

Budget Resolutions and Economic Situation

Andrea Leadsom Excerpts

Thursday 21st March 2013 Commons Chamber

[Ed Balls]

The problem with what the Chancellor is doing this year—cutting in-year spending—is that it is the opposite of the automatic stabilisers. He is cutting spending and the OBR says that it is having a direct impact on economic growth. I sympathise with everybody who loses their job, including the hon. Member for Bognor Regis and Littlehampton (Mr Gibb). In my constituency unemployment has come down, but working families are worse off because of cuts to tax credits, the bedroom tax and cuts to child care. The £700 million-a-year tax break for new child care is no compensation for the £7 billion a year cut in support for families.

[Andrea Leadsom (South Northamptonshire) (Con)]

Is the right hon. Gentleman aware that inequality in income has dropped significantly since May 2010?

[Ed Balls]

I think the hon. Lady may find that that is before the millionaires’ tax cut kicks in in 14 days’ time.

The hon. Member for Bognor Regis and Littlehampton asked whether I am being serious. I am being deadly serious about the failure of this Government’s economic plan. They are failing on growth and on borrowing, and living standards are falling as families and businesses pay the price. I warned the Chancellor two and a half years ago that his plan could not work and that, given that a global hurricane was brewing, it was the wrong time to rip out the foundations of our own house. I told him that monetary policy in a situation akin to that of Japan in the 1990s or of the world in the 1930s could not do the trick to restore growth. I warned him that attempting to have the biggest tax rises and fastest spending cuts in our post-war history, and probably beyond, would backfire and choke off recovery rather than support it.

The Under-Secretary of State for Skills, the hon. Member for West Suffolk (Matthew Hancock) is the Chancellor’s former adviser and he is now a member of the Business Secretary’s ministerial team. He wrote an article in The Times in the autumn of 2010 in which he said—this is the Chancellor’s former adviser—that faster deficit reduction would lead to stronger growth. He said, as the Chancellor has also argued, that this was an example of expansionary fiscal contraction, but fiscal contraction has not been expansionary—it choked off the recovery. If the Chancellor was relying on advisers like the hon. Gentleman, it is no wonder that he got into such trouble.

--- Later in debate ---

[Vince Cable]

My hon. Friend is right. There are a series of bottlenecks in raising risk capital. At the top end, the problem is accessing equity markets, and at the bottom end the problem is in raising angel finance, which is something else that we are trying to support. As it happens, the business bank will have a role not just in lending, but in developing equity markets for small-scale companies.

[Andrea Leadsom]

I was delighted that recently the Financial Secretary announced a consultation on a new independent payments regulator. Does my right hon. Friend agree that if we are to solve the problem of the lack of bank lending to SMEs, we need a raft of new challenger banks? The best way to achieve that would be full account number portability, which would encourage new entrants into the market.

[Vince Cable]

My hon. Friend is right, and the details of the Treasury’s proposals on that point are emerging quickly. For the first time in a lifetime, we are now getting serious challenger banks in the UK, such as Aldermore, Metro, Shawbrook and others, which are an important addition. I hope that the Co-op, the Nationwide and other mutuals that are trying to get into this market will also contribute.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 12th March 2013 Commons Chamber

[The Chief Secretary to the Treasury (Danny Alexander)]

I note that the shadow Chancellor did not refer to his opportunistic motion this afternoon, because we would have had a chance to refer to Labour’s record of welfare for the wealthy during their time in office: a lower rate of corporation tax than for the person who cleans the offices of the private equity fund manager; a lower top rate of tax of 45p during Labour’s 13 years in office; loopholes in the stamp duty system; and the 10p tax rate fiasco. We will take no lessons on tax fairness from the Labour party, and we will vote for our amendment that confirms Liberal Democrat support for a mansion tax.

[Andrea Leadsom (South Northamptonshire) (Con)]

Will my right hon. Friend update the House on what measures the Government are taking to put right the unbelievably poor regulation by the previous Government, and say what the permanent bank levy will do to improve revenues to the Exchequer, over the bank bonus implemented by the previous Government?

Financial Services (Banking Reform) Bill

Andrea Leadsom Excerpts

Monday 11th March 2013 Commons Chamber

[Greg Clark]

I do not disagree with the hon. Gentleman’s analysis. A higher leverage ratio is important. However, we have reflected the view of the Vickers commission that a higher leverage ratio is not necessarily required immediately. It is our intention to bring it in following the review in 2017. That is a reasonable time frame. I repeat that it is our intention that there should be a backstop ratio.

The final major difference between the Bill and what was recommended by the parliamentary commission is that it does not include proposals on how creditors, rather than taxpayers, will be expected to bear the costs in the event of a bank failure. We are working with other European countries to develop a credible and effective bail-in tool as part of the European recovery and resolution directive, reflecting the recommendations of the global Financial Stability Board.

The Irish presidency of the EU has set out plans to make rapid progress towards concluding the recovery and resolution directive. The RRD is due to come into force in 2015 and the bail-in tool by 2018. Given that progress, we have not included clauses on the matter in the Bill, but if agreement cannot be reached, which we do not expect to happen, we will consider tabling amendments later in the Bill’s passage to allow the UK to act alone.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my right hon. Friend agree with me and Andy Haldane that bank account number portability could make a positive contribution to the prospects of easy resolution in the event of a future bank failure?

[Greg Clark]

My hon. Friend is a passionate advocate of that, and I think that what I will say about it will please her. I hope that she will be able to contribute to the debates on it in the weeks ahead.

The Government intend to go further on the matter of competition than was suggested in the reports of the two commissions. I strongly believe that the concentrated nature of the UK banking industry is unacceptable. I want to see far greater possibility, and indeed reality, of entry into the market by new banks and building societies. One of the barriers to that has been access to the UK payments system. Potential challengers have to win the permission of incumbents to be able to use the system. The Government will therefore shortly consult on a proposal to make access to the payments system regulated, to ensure that it is available on fair, reasonable and non-discriminatory terms. Subject to the findings of the consultation, the Government will consider tabling amendments to the Bill to give the regulator the necessary powers. I think that would address my hon. Friend’s ambitions.

--- Later in debate ---

[Chris Leslie]

Recently I have been looking at a number of Thatcher quotes, given that the Prime Minister mentioned TINA—there is no alternative—which hon. Members will remember. Another famous quote from Lady Thatcher was, “Always leave yourself a way out”, and I wonder whether the emollient approach taken by the Financial Secretary is because he realises that when there is inadequate scrutiny in this House, the questions go to the other place and it is likely that the Government will have to back down on some of these matters. Perhaps he is listening to the advice of Baroness Thatcher on some of these issues.

It is not adequate to expect, as the Minister suggested, that we will be able to scrutinise the Bill sufficiently on the Floor of the House on Report. As he knows, with the knives that come into effect during considerations on Report, one often finds that amendments are put without a full debate. It is a different process from the Commons Committee stage. The programme motion should reflect the right of the Commons to scrutinise the full version of the Bill, and that is not the version we have before the House today. If the Government were serious about this issue, the Chancellor would be here. Clearly, our downgraded Chancellor has downgraded the banking reform Bill.

[Andrea Leadsom]

The hon. Gentleman has mentioned a few times that the Chancellor is not here. Does he regret that his former boss, the ex-Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), is not here to make a sincere apology to the House for his role in the mess that put us in the place we are in today?

[Chris Leslie]

I presume that is almost an apology for the anti-regulatory approaches historically taken by the Conservative party. I do not seem to recall Conservative Members ever saying, “Please, more regulation! Let us have it now. This is insufficient; we must regulate far more firmly.” It does not seem that that was ever part of the lexicon in the approach taken by Conservative Members.

--- Later in debate ---

[Chris Leslie]

I do not know whether the hon. Gentleman is telling the full story of what he truly believes about regulation. To listen to Conservative Members today one would think they were all keen market regulators. Perhaps the Conservative party has transformed—the Cameronian vision we have all been waiting for—but, as I understand it, it still regrets the regulatory encroachment on to the market in these matters.

[Andrea Leadsom]

Does the hon. Gentleman recall that back in 1995, when Barings went bust, there was not a run on a bank? I remember playing a very small part helping Eddie George, the then Governor, to call round international banks urging them not to allow a run on the banks in the following weeks. The reason was that he understood that he was entirely accountable for ensuring the integrity of the banking system. Is that not the point? When Labour came into power and created the tripartite system, it simply removed accountability from any one body. We are trying to return it to the Bank of England.

[Chris Leslie]

We will see what happens under the new Financial Conduct Authority, the Prudential Regulation Authority, the Bank of the England and the Chancellor. It is important that Conservative Members realise that self-regulation failed and that not having that statutory arrangement was no great thing. Eddie George was the Governor who said, “Let’s just trust the chaps at the desks to deal with these issues.” That was how banking reform was regarded during their tenure in office. But this is turning into a history lesson.

--- Later in debate ---

[Andrea Leadsom (South Northamptonshire) (Con)]

I am delighted to speak almost last in this debate.

I agree with the hon. Member for Hayes and Harlington (John McDonnell) when he says that many people have suffered terribly as a result of the financial crisis, and when he speaks of the greed and the complete lack of regulation and control over banking over the past decade.

The British people are still furious about the behaviour of bankers, and they have every right to feel that way. Banks were already seen as greedy and arrogant. They have now reached the depths of humiliation in the wake of the LIBOR manipulation, PPI mis-selling and bank swaps mis-selling. Individual bankers are rightly being investigated by the police. I and all colleagues in the Chamber hope that if criminality is proven, they will go to jail and bear the same brunt of punishment as any other criminal.

Nevertheless, we must recognise the vital importance of the financial services sector to the UK economy. It is a huge employer. If all financial services are included, more than 1 million people have jobs in the sector. The vast majority of those people do an honest day’s work for a fairly modest salary and do not receive a large bonus.

We must also remember that we are talking about a globally mobile business. In the investment banking business, someone can pick up the phone in London on a Friday morning, put it down on Friday night and carry on doing the same deal on a Monday morning in Singapore. While reforming the industry to make it safer for people in this country, we must be careful to preserve it so that we can take advantage of the enormous opportunities that it provides, such as the sale of mortgages and health and life insurance policies in developing markets such as China, Brazil and South Korea that do not have developed, simple, basic banking packages. We can make profits for Britain at the same time as helping those developing economies. It is important that we remember to protect this industry at the same time as reforming it.

The Bill offers the opportunity to put right many of the wrongs of the previous Government’s approach to financial services in the UK. It will help to bring back to UK banking what used to be called the balance of fear and greed. For many years, there has been enormous greed with no fear of consequences. We have allowed a small group of vast institutions to grow by consolidations, mergers and takeovers. The culture has been one of, “Heads, I win; tails, the taxpayer loses.” That has proven to be true.

The Bill will address Labour’s failed tripartite system of regulation. It will put accountability for the supervision of the banks and for systemic risk back into the hands of the Bank of England. In 1995 when Barings went bust, before Labour had had the chance to mess up the regulatory system, I was a small cog in the wheel trying to prevent a run on the banks. I remember supporting the then Governor, Eddie George, to ring the various international banks to ensure that there was not a run on the banks on Monday morning. Why did he do that over that fateful weekend? It was because he knew that the buck stopped with him and that it was entirely down to him to ensure that there was not a run on the banks. How different it was under Labour’s tripartite system. When people were queuing down the streets to take their money out of Northern Rock, the Treasury was looking at the Bank of England, which was looking at the FSA, and nobody took any action. That was utterly shameful, and the Bill will ensure that it cannot happen again.

[Jim McGovern (Dundee West) (Lab)]

The hon. Lady said that she was a small cog in the wheel and that Sir Eddie George was the big wheel. Does she think that that was working at that time?

[Andrea Leadsom]

I always think that the proof of the pudding is in the eating, and the fact is that Barings was culpable for a potential massive run on the banks, because of rogue trading. It did not happen, and why? It was because one individual took responsibility, surrounded himself with people who could prevent it and ensured that it did not happen. We do not need to look any further to see that it was working.

There is one area in which the Bill is a lost opportunity. It offers us the chance to address the big elephant in the room, which is the lack of competition in the banking sector. We have the chance to go well above and beyond what John Vickers proposed. Retail banking in this country should be truly competitive. As we all know, one of the biggest problems in our economy right now is the lack of finance for small and medium-sized enterprises, which are the lifeblood of our economy.

[Steve Baker]

My hon. Friend is absolutely right, of course, but the other problem is the lack of return for savers. Is that not the other of the current system’s twin failings—that it is failing to intermediate between the two groups?

[Andrea Leadsom]

I agree completely, and my hon. Friend tempts me down the route of blaming quantitative easing for the extraordinarily diverse results in the savings market, particularly for pensioners and other savers whom we desperately need to spend more. The evidence is that as a result of reduced annuities, their propensity to save has increased. We would like people to spend more in the economy, but they are not doing so.

The best way to shake the banks out of their current complacency is to allow new entrants to get into the market, bringing with them the high standards of service that customers believe they should be able to take for granted, including IT that works. To go back to Adam Smith in “The Wealth of Nations”, a truly competitive environment requires that there is free entry and exit for market players. That is not the situation in banking in this country right now. New entrants have experienced massive barriers to entry not just from competitor banks but from the regulators. Likewise, failure has not been possible, as we have seen at eye-watering cost to the taxpayer. Rather, the trend has been towards consolidation and mergers, with a small number of very large banks dominating. In 2000, there were 41 major British banking groups and subsidiaries, whereas in 2010 there were just 22. Four banks have an almost 80% market share of the personal current account and SME lending market, so there is evidently a need for genuinely comprehensive action to increase competition in Britain.

One significant step in the right direction would be to take the opportunity to sell off the state-owned banks, as the Governor of the Bank of England himself suggested last week at the Parliamentary Commission on Banking Standards. Selling off the taxpayer-owned banks in small parcels would instantly create potential new challenger banks, and I urge the Government to consider doing so again. The Governor regretted the fact that RBS remained in public ownership and pointed out that we had not yet solved the “too big to fail” problem. He urged the Government to do more.

As right hon. and hon. Members have heard me say a few times before, the real game changer would be introducing full bank account number portability. We take that for granted with our mobile phones—if we change our provider, we take our mobile phone number with us. Why should it be any different with our bank accounts? Earlier this evening, the Father of the House told me that one of his ex-colleagues had spent years banging away in the Chamber about the importance of mobile pensions in the private pension sector. I was unaware that it had ever not been possible for someone to take their pension with them when they changed jobs, but apparently one of the greatest revolutions in the pensions sector happened when account number portability was achieved. We know what such portability did for the mobile phone sector; surely the time has come to introduce it to the banking sector.

At a recent round table meeting with various luminaries from the banking sector, Which?, the Bank of England and so on, all those present agreed on a show of hands that if anyone is to achieve bank account number portability, the UK should be first. Let us, as the world’s leading financial services centre, be first to innovate and not wait until someone else does it.

Switching instantly between banks would remove the huge barrier to entry that currently constrains new, innovative banks. Several benefits would accrue from that policy. First, it would cut barriers to entry for new challenger banks. Increased competition would force existing and new banks to differentiate themselves to retain customers, leading to enormous improvements in customer service and the differentiation of bank offerings. Secondly, new challenger banks would mean more banks and increased access to new and different sources of funding, and over time that would reduce the risk of banks being “too big to fail”. The US has more than 3,000 banks and when a retail bank fails there is just a ripple and hardly anyone notices. We need diversity of financial service providers, which I genuinely believe such a measure would provide.

Thirdly, industry experts argue that the impact of creating a new shared payments clearing infrastructure would mean the banks sorting out the problem of multiple legacy systems that dates back to the consolidation of the 1990s. Clearing banks currently spend billions each year on string and Sellotape solutions for creaking systems, and we have seen twice recently the problems that RBS subsidiaries had in managing payments for their customers because of poor systems and systems failure. New systems could lead to a reduction of up to 40% in bank fraud that costs the sector billions of pounds each year.

Fourthly, multiple legacy systems within banks make it hard for them to evaluate business ideas. The banks’ poor systems make it harder for them to assess good business ideas versus good collateral, and better and new systems would enable them to make better lending decisions to SMEs. Finally, and importantly, account number portability would offer the potential for the orderly resolution of a failed bank. The potential to close down a bank and transfer its accounts overnight to a solvent bank would be a valuable tool in any future financial crisis.

To kick-start a move to account number portability, the Government would need to introduce a new payments regulator with the power and mandate to require equal and fair access to money transmission systems. Only an independent regulator of money transmissions would get the job done, and using an existing regulator or the Office of Fair Trading is unlikely to be effective. I therefore welcome the Minister’s announcement of a consultation on establishing a new, independent payments regulator.

I conclude by saying that seven-day switching, as proposed by John Vickers, is not the same or even similar to full bank account number portability. It is a costly, overly-manual way of way of improving the customer experience, and does not solve the problem for small businesses, many of which—some 80%—have felt unable to change bank account provider in the past three years. Banks have SMEs tied up and want them to have personal overdrafts and bank accounts, business accounts and fully funded bank loans, whether or not they draw them down. It is extremely complicated for an SME to move banks in the current environment, and trying to change bank account number is part of that problem, as well as the lack of other banks that are willing to lend.

The first problem with seven-day switching is that it will not change the future for SMEs. Secondly, it does not address the administrative burden for SMEs. If we find that seven-day switching dramatically increases the number of people who switch bank accounts, that will simply increase the burden on all of our milkmen, dry cleaners, Tesco or whoever it might be. We will all have to change our bank account numbers with them, and they will have to change their systems. For big businesses that might not be a problem, but it is certainly a problem for small businesses. Which? has provided a wealth of evidence showing that SMEs are concerned about the impact of seven-day account switching on their administrative burden. I urge my hon. Friend the Member for Chichester (Mr Tyrie), in his Parliamentary Commission on Banking Standards, to put forward proposals on bank account number portability when he produces the final report later next month.

Now is not the time for timidity in reforming our banking sector, and it is not the time for false economies. We have to focus on enabling new entrants into the market, taking steps that are good for the consumer and for small businesses, and beginning the long process of restoring the reputation of our banking sector.

--- Later in debate ---

[Andrea Leadsom]

Is not this exactly the issue that we have been debating over the past week, with the EU proposal to cap bonuses? That would have the unintended consequence of pushing up salaries, which are notoriously difficult to claw back. Does my hon. Friend agree it would be much better to put in place a proper compensation scheme, perhaps through statute, that was determined by the banks themselves and that ensured clawbacks and full accountability?

[Stephen Barclay]

My hon. Friend is absolutely right. One-size-fits-all rules often capture the good but are insufficiently robust to deter the bad. Yes, the Bill is welcome and takes constructive steps forward, but we also need to see more measures from the Treasury on individual fines.

--- Later in debate ---

[Sajid Javid]

I think that the hon. Gentleman needs to do some homework on the German model.

Let me turn to switching. The Vickers commission made a number of recommendations on competition, one of which was for a seven-day switching service. That will go live in September this year. It will be free to use and will come with a guarantee to protect customers against financial loss in the event of any errors occurring during the switching process. A number of Members, not least my hon. Friend the Member for South Northamptonshire, made interesting points on full account number portability. The Government have always kept an open mind in that debate, arguing that the seven-day switching service should be allowed a good run. If it does not deliver the expected consumer benefits, more radical options will of course be looked at, including full account number portability.

The structural reforms proposed in the Bill will of course aid competition. As the Bank of England’s executive director for financial stability, Anthony Haldane, said to the parliamentary commission, one of the biggest challenges we face on competition concerns is that banks are perceived as being too big to fail. The banking sector reforms made through the measures in this Bill are designed to address precisely that issue.

[Andrea Leadsom]

Does my hon. Friend agree, though, that the big banks will lobby extremely hard against greater competition, particularly full bank account number portability, and does he undertake to resist their lobbying attempts?

[Sajid Javid]

My hon. Friend makes a good point. The contents of the entire Bill show how the Government have already resisted the attempts of many in the banking lobby.

My right hon. Friend the Chancellor—this will also interest my hon. Friend—has, as she will know, announced a consultation on bringing the payment system into regulation. We will make sure that new players in the market can access the payment system in a fair and transparent way and that they serve the needs of consumers, not those of established banks. Members may want to note that we will launch this consultation soon after the Budget. I am sure that my hon. Friend will want to make representations on full account portability to the consultation.

Several hon. Members talked about RBS. The Government believe that RBS’s future is as a major UK bank with the majority of its businesses in the UK as regards personal, SME and corporate banking. United Kingdom Financial Investments Ltd continues to be responsible for managing the Government’s shareholding in RBS on a commercial and arm’s-length basis and for developing and executing a strategy for disposing of the investment in an orderly and active way. UKFI continues to look at a full range of options for disposing of the investment, and RBS should emerge as a stronger and safer bank able to maintain lending to businesses and consumers that can, in time, be returned to full private sector ownership.

The Bill before us ensures that a future Government can keep bank branches going and cash machines operating while letting investment arms fail. It ensures that taxpayers will not fork out for the mistakes of others. Put simply, it deals with exactly the issues that are of concern to most of the UK public after the recent crisis. Financial services are a vital part of our economy, as evidenced by points well made by my hon. Friend the Member for Cities of London and Westminster, and they employ over 1 million people across the country. Let us not forget that the total tax take of the financial sector, including the income tax paid by its employees, adds up to over £60 billion—money that we rely on to fund our vital public services. It is crucial that we make sure that the British public again begin to trust the industry, that banks continue to serve families and businesses, and that the sector becomes what my right hon. Friend the Chancellor has described as a

“financial industry that is strong, successful and inspires the pride of all those who work for it.”

Question put and agreed to.

Bill accordingly read a Second time.

Financial Services (Banking Reform) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services (Banking Reform) Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 18 April 2013.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Greg Clark.)

Banking Reform

Andrea Leadsom Excerpts

Monday 4th February 2013 Commons Chamber

[Greg Clark]

The hon. Gentleman raises a very important point. I met the Federation of Small Businesses and the Bully-Banks organisation and I conveyed their concerns to the FSA, which the hon. Gentleman knows is set up to be the independent regulator. I think most people were relieved that the FSA proposals of last week will result in compensation for the affected businesses within a rapid time frame. What happened is totally unacceptable, and is another feature of the scandalous decline in reputation that the banks have suffered. Small businesses in particular have a right to regard their bank manager as someone who acts in their interests, rather than someone who flogs them dodgy products that they do not need in the first place. That is a breach of trust in banking. I am absolutely insistent that the FSA should conclude this process, giving full recompense to those who have been mis-sold products.

[Andrea Leadsom (South Northamptonshire) (Con)]

The retail ring fence is a good idea, but the real game-changer for banking will be the introduction of full bank account number portability, because it will break open the oligopoly banks. Does my right hon. Friend agree that it is also important for the Payments Council no longer to be controlled by the big banks? Breaking open competition and introducing new challenger banks is of key importance.

[Greg Clark]

I thank my hon. Friend for the effort that she has devoted to promoting this agenda. It seems to me that if there is to be genuine competition, people should have a choice of banks, and it should be easy, not difficult, for them to make changes. I hope that the work that my hon. Friend is doing will be reflected in the policies that we are enshrining in the Bill, and I look forward to detailed discussions with her about how that may be possible.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 29th January 2013 Commons Chamber

[Greg Clark]

The hon. Lady should reflect on the fact that the fall in unemployment in the north-east of nearly 25% is greater than that in any region in the country. She should be celebrating the turnaround in the north-eastern economy to which she and I have been aspiring for many years.

[Andrea Leadsom (South Northamptonshire) (Con)]

To go with the enterprise taking place in Northamptonshire, may I urge colleagues throughout the House to consider having an apprentice in their own office? I have had apprentices for two years now, both of whom were school leavers from Northamptonshire schools. They do a brilliant job and there are all sorts of facilities available to support that.

[Greg Clark]

If the apprentices that work in my hon. Friend’s office contribute to her own productivity and innovation in policy production, she is a standing example of the success of the scheme.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 11th December 2012 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

The hon. Lady is absolutely right that one of the real problems in banking over recent years was that the people who had a trusted relationship with their customers saw them as sales targets rather than as people to be helped. That needs to change. The Financial Conduct Authority is very clear that these kinds of incentives have to go.

[Andrea Leadsom (South Northamptonshire) (Con)]

I congratulate my right hon. Friend the City Minister on reassuring us that he intends to require the Prudential Regulatory Authority and the FCA to promote new bank competition. Does he agree that full account portability could offer the biggest game changer for bank competition, and that an amendment to the draft Financial Services (Banking Reform) Bill could achieve that?

[Greg Clark]

I am grateful to my hon. Friend for her question and for her campaigning on this issue. My hon. Friend the Economic Secretary and I will meet her to discuss her proposals. The draft Bill responds to the Vickers report. He said that if portability reforms were not adequate we could take further steps, so we have a vehicle to do so.

Financial Services Bill

Andrea Leadsom Excerpts

Monday 10th December 2012 Commons Chamber

[Damian Hinds]

The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.

I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive, and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.

On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.

[Andrea Leadsom (South Northamptonshire) (Con)]

I want to speak briefly on Lords amendments 25 and 36, both of which deal with the issue of competition in respect of the new regulators: the Prudential Regulation Authority that will supervise the banking sector and the Financial Conduct Authority that will supervise business conduct in the banking sector. I seek reassurance from the Minister that having regard to the quality and level of competition in the marketplace will be sufficient to drive a radical improvement in respect of the new challenger banks.

As the Minister knows, the five oligopoly banks in the UK currently have over 80% of all small and medium-sized enterprise bank accounts and personal current accounts. That means access to finance is very limited in respect of choice and types of finance, and as bank balance sheets are currently in a difficult position, it is extraordinarily hard for small businesses to get hold of the financing they need to grow, which in turn will help our economy to recover. So the Bill gives us a once-in-a-lifetime opportunity to ensure that the regulators are, in future, incentivised to ensure not only that banks do not fail, but that we encourage new entrants to the market. At the moment, many would-be bankers find that they are set enormous hurdles, such as having to set up a dealing room just to provide evidence of their ability to do so, yet at the end of an enormous obstacle course the FSA tells them that they cannot have a banking licence. What we cannot have in the future is the PRA and the FCA combining to make it as difficult or more difficult to encourage new entrants into the market. So I hope that the Minister will set out how the regulators of the future will not only tolerate, but encourage new competition.

[Greg Clark]

This excellent debate has covered a number of issues that colleagues from all parts of the House feel passionately about, and correctly so because they are of huge importance to all our constituents, especially the most vulnerable in our society.

In the short time available, I wish to address some of the points that have been made directly by hon. Members. The shadow spokesman, the hon. Member for Nottingham East (Chris Leslie), asked how the powers would be exercised by the Financial Conduct Authority. The powers come directly from the FCA’s remit, and he will be aware that the Bill establishes a far-reaching consumer protection objective. The overall objective is

“securing an appropriate degree of protection for consumers.”

The Bill goes into detail to require the FCA to consider the following: the different degree of risk to be tolerated by different types of consumers; the different needs of different types of consumers for the provision of information; and the general principle that those providing financial services should be expected to provide consumers with a level of care appropriate to their needs. I think that colleagues would recognise that this is a far-reaching objective which gives quite general powers to protect consumers, and it is right that that should be so.

The hon. Gentleman mentioned basic bank accounts, on which some progress continues to be made. There is no universal legal right to a basic bank account, but the industry guidance still stands. It states that if a consumer asks to open a basic bank account and meets the qualifying criteria, the firm should offer them an account and that banks can refuse to open an account for a customer only where the customer has a history of fraud or is an undischarged bankrupt. Those provisions continue.

Public Service Pensions Bill

Andrea Leadsom Excerpts

Tuesday 4th December 2012 Commons Chamber

[Sajid Javid]

My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.

The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.

[Andrea Leadsom (South Northamptonshire) (Con)]

The Minister mentions unfairness. Does he agree that one of the greatest unfairnesses was when the previous Government got rid of advance corporation tax relief on pension funds, which destroyed the private sector pensions industry and left many private sector workers much worse off than this excellent Bill?

[Sajid Javid]

My hon. Friend is absolutely right—the change to which she refers had a dramatically negative impact on private sector pensions.

The benefit structure of many existing schemes has led to benefits being disproportionately directed towards higher earners.

--- Later in debate ---

[Chris Leslie]

In an era of increasing life expectancy, it is right and necessary to reform public service pensions in order to ensure that they are affordable and sustainable in the long term. That is why Labour made significant changes to public service provisions when in office, including through increasing the normal pension age from 60 to 65, introducing a cap-and-share mechanism to protect taxpayers from increasing costs and reforming contribution levels. According to the Public Accounts Committee, those reforms, implemented by the previous Government, will save the taxpayer £67 billion over 50 years.

Unfortunately, instead of building on those reforms, the Government ripped up many of them, making sensible reform harder: they have imposed, without negotiation, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. Announcing those changes before the Hutton report on pensions was even published was unfair and needlessly provocative. Those changes are not in the Bill, however, so we did not have a chance to address them in amendments and in Committee and on Report.

Conversely, the main aims of the Hutton reforms in the Bill are ones with which we broadly agree, most notably the shift from final salary to career average defined benefit schemes, the increase in pension age to take account of increasing longevity, and a mechanism to ensure that increasing costs are contained within schemes and do not fall squarely on the taxpayer. It is important for the sustainability of public service pension schemes that those changes are implemented properly, which is why we do not wish to oppose the Bill this evening. However, as we said on Second Reading, we have serious concerns about the detail of the Bill. We said that we hoped the Government would work constructively with us in Committee and the other place to improve it. There was some movement from the Government, but in our view it was not sufficient.

[Andrea Leadsom]

Can the hon. Gentleman therefore confirm that his party would not change the future pensions link from CPI back to RPI?

[Chris Leslie]

I do not think it would be sensible to make a permanent “no review” announcement when it comes to indexation, particularly when some of the projections have been showing that the future burden on the taxpayer might not be as great as the Government have made out. For the time being, we have not been able to make propositions on that, because the scope of the Bill did not allow it.

However, we proposed amendments in a number of other crucial areas in seeking to improve the Bill, focusing particularly on the questions of trust and confidence. We sought to improve the Government’s proposals in a number of ways, most notably in implementing the fair deal—a commitment that was integral to the agreements that had been reached. I am glad that the Minister had the opportunity to correct his words on the local government pension scheme aspect of that, because there were some ripples emanating through the Chamber from some of the previous words he uttered. There is also the question of the Government’s ability to reduce accrued benefits retrospectively. They should have been stronger on that and firmer commitments should have been given as guarantees on replacing defined benefit schemes with new career average defined benefit schemes.

--- Later in debate ---

[Chris Leslie]

We did not table any amendments on judicial pensions. I suspect that the question of relative taxpayer support for private pensions might come up tomorrow in the autumn statement. I am intrigued that hon. Members have castigated previous Governments for changes that have affected private sector schemes. It will be interesting to see what the effect will be on the sustainability of some of those pension pots, but we can only speculate at this stage and see what happens. However, this question is certainly of the moment. It is only a matter of hours before the Chancellor stands up and—undoubtedly—makes his announcement on pensions tax relief. We will see what happens at that point, but we felt that some significant proposals needed to be made.

[Andrea Leadsom]

rose—

[Chris Leslie]

I am conscious of the time. I would be grateful if the hon. Lady let me conclude my remarks.

It was argued that we must not bind future Governments by amending the Bill. That was not a very strong argument, given that legislation can be introduced at any time. We also felt that safeguards were needed to address people’s concerns about the effective sequestration of their deferred wages—their pension savings—by retrospective changes. At no point did we propose amendments that contradicted the Hutton principles. We sought to be constructive, and I am grateful that the Minister recognised the constructive changes that we proposed.

We had some significant victories, and I am grateful to the Minister for at least keeping an open mind on some of these points. In particular, I am pleased that we managed to get a guarantee—it is due in the other place—that future members of defined benefit schemes will receive an annual benefits statement setting out full information on changes to their pensions. That is a big step forward, and I am grateful that the Minister moved on that point.

We will want to come back to some of those questions in the other place, particularly those on scheme capability reviews and the working longer review in the NHS, and to ask why the Government are irrationally not letting those arrangements come to fruition in the drafting of legislation. I am still not fully convinced that the issue of the closure of local government pension schemes has been adequately dealt with, but I know that the Minister has said that he is happy to look into it.

Many colleagues will naturally have serious doubts about the Bill. That is entirely understandable, given the differences between it and the Hutton proposals. However, pensions reform is important both for the taxpayer and for scheme members themselves. Our hope is that the other place will see the strength of our arguments and make the changes that this House has been unable to secure. We hope that their lordships will appreciate that only through changes to the Bill will we achieve successful and sustainable pension reform. It is with that hope in mind that we shall not oppose the Bill at this stage, but we hope for further improvements in the other place.

--- Later in debate ---

[Andrea Leadsom]

I welcome this Bill for three particular reasons. First, I welcome the move to career average rather than final salary, which is absolutely key. Secondly, linking eligibility to normal pension age to the state pension age is very important. Thirdly, transitional relief for people with 10 years to go before they retire is vital. I commend the Government for their work.

I have two further points. First, it is a shocking indictment of the last Government that in 1995 there were 4.1 million public sector workers in a defined benefit scheme, while in 2011 there were 5.3 million—an increase of more than a million public sector workers on defined benefit schemes. Surely it is the legacy of the last Government’s spending money we simply could not afford that has put us in a position where we have had severely to curtail some of the benefits that public sector workers enjoyed in the past.

Finally, 79% of workers in the public sector have defined benefit pensions as against 9.4% in the private sector. Again, it is a complete indictment of the last Government that they have taken what was one of the best private sector pension arrangements in Europe and made it one of the worst. It will be a great pity if the Opposition do not welcome the attempt in this Bill to sort out the mess that they left us.

Bank of England

Andrea Leadsom Excerpts

Monday 26th November 2012 Commons Chamber

[Mr Osborne]

I can assure the hon. Gentleman that Dr Carney and Dr Bean are excellent.

[Andrea Leadsom (South Northamptonshire) (Con)]

I am so excited about this appointment that I could jump up and down—but I won’t.

Does my right hon. Friend agree that at some point during the next year he should have a chat with Dr Carney about the ground-breaking bank revolution that would ensue from bank account portability, and about the fact that that could be the very first thing that he did as the new Governor of the Bank of England?

[Mr Osborne]

I hope that my hon. Friend will contain her excitement when she has a chance to question Dr Carney, when he appears before her Select Committee. As she knows, from next year we will have full account-switching, which means that people will be able to switch their bank accounts, including direct debits and so on, within seven days. That will make switching much easier. My hon. Friend has advanced strong arguments for going further and introducing account portability, and we are studying that idea closely. There are pros and cons, which the Vickers commission considered, but she has put her case very powerfully.